Oct 4, 2017

The Reason Innovators Are Seen As a Public Nuisance in China

As in the US and Europe, concerns about waste, cost and environmental impact are rising, but may also mask deeper worries about loss of control over social issues.

in China, the fact that the government has sanctioned such widespread criticismsuggests that it, too, wants to rein them in before they become a threat to the current political hegemony. JL

Li Yuan reports in the Wall Street Journal:

Internet companies touch more aspects of people’s lives than any
other sector in the world’s second-biggest economy. But they’re
ill-prepared for the expectations of social responsibility that come
with their influence and power. The public perception of them changed very quickly
from innovators to nuisance. “They impact so many people’s
lives. It’s natural that the public wants to hold them accountable.”As in Silicon Valley, Chinese tech companies like to think of themselves as agents of positive change. And just as in the U.S., the public doesn’t always see them that way.
China’s three main online meal-delivery services are in the crosshairs of public opinion over perceptions they’re not socially responsible. A nonprofit group is suing the companies—Ele.me, Baidu Waimai and Meituan Dianping—for generating huge amounts of waste that it alleges constitutes environmental harm. A Beijing court agreed early this month to hear the case.
Public disapproval started to build after an article trashing the apps went viral on social media last month. The article, headlined “Meal Delivery Is Destroying Our Next Generation,” accused them of pursuing growth to the detriment of the country’s already degraded environment. Big state media followed up, and in weeks a tide of news articles and social-media commentary swelled.
“Say ‘no’ to meal delivery!” became a popular cry on Weibo, China’s Twitter -like service.
“Can’t agree more,” commented Mao Daqing, founder of space-sharing startup UrWork (Beijing) Venture Investment Co., on his WeChat account. “Many people around me, including my child, are eating garbage everyday and producing garbage at the same time.”
Ele.me, Baidu Waimai and Meituan Dianping are among the most popular services of the mobile internet. Some 295 million Chinese, nearly 40% of the country’s internet users, turned to one of their apps in the first half of 2017, up from 21% a year ago, according to government data. The services have received funding from the biggest forces in China’s tech world—e-commerce giant Alibaba Group Holding Ltd., game and social-media titan Tencent Holdings Ltd. and Baidu Inc., the dominant search engine.
These internet companies touch more aspects of people’s lives than any other sector in the world’s second-biggest economy. But they’re ill-prepared for the expectations of social responsibility that come with their influence and power, say industry experts and social activists.
Some internet companies grew to be very big very quickly, but the public perception of them also changed very quickly from innovators to nuisance,” says Yin Juelin, a management professor at Xi’an Jiaotong-Liverpool University. “They impact so many people’s lives. It’s natural that the public wants to hold them accountable.”
Meituan and Ele.me, which recently acquired Baidu Waimai though they operate separately, declined to comment on the lawsuit. They said in statements that they’re committed to protecting the environment, and each noted various green initiatives under way.
Meituan and Ele.me have added the option of “no-chopstick packages” in recent weeks. Baidu Waimai will make the change next month. Ele.me started using a new type of biodegradable plastic bag in April. Meituan said it appointed a chief environment officer in early 2017.
Zhang Shouchun, the attorney representing environmental group Green Volunteer League of Chongqing that brought the lawsuit, said his client previously contacted the companies about adding a “no-chopsticks” option but never got anywhere. The suit demands that the companies apologize for the environmental damage and set up funds to clean it up.
“The internet companies are making significant contributions to China’s economic growth, but they’re also causing huge problems,” said Mr. Zhang. “They need to be more responsible.”
Public lashings of internet companies over social accountability recur frequently so they ought to be better prepared. Tencent landed in hot water this summer when state media and the public criticized its top mobile game, “Honor of Kings,” for being so addictive that it was harming China’s youth. Tencent now limits daily play time for users under 18.
Baidu’s share price got hammered last year after a public outcry over the death of a college student suffering from a rare cancer; he died following treatment found via the search engine. Meal-delivery apps are so pervasive and cheap many Chinese scarcely leave the office or home to eat. Meituan says it handles more than 13 million orders a day. Ele.me says that it had served 260 million customers by June 2017 since its founding in 2008. Many of those customers come from a growing middle class anxious about dirty air, water and food.

Monica Shen, an executive at Shenzhen-based technology startup Seeed Studio, says she avoids ordering meal deliveries due to environmental concerns. She says she is willing to pay for more environmentally-friendly packaging if there’s an option.

Catering to these consumers will test the business model favored by the meal-delivery services and many other mobile-internet startups: spend to build scale and capture market share, worry about profits later.

Ele.me, backed by Alibaba, is valued at $6 billion and has raised $2.3 billion since 2008. Meituan Dianping, which has funding from Tencent, raised $3.3 billion in January 2016 at a valuation of $18 billion and is currently raising another $2 billion, according to a person familiar with the matter. None of them, however, is profitable, according to analysts and investors.

These companies need to tweak their business models to shoulder additional costs, says Ms. Yin, the management professor: “They have to respond to the demand of the growing middle class. This issue isn’t going to go away.”

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As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance.Learn more...